Alibaba Group Holding Limited (NYSE:BABA) Is the Best Contrarian Coronavirus Pick Now

Alibaba Group Holding Limited (NYSE:BABA) Is the Best Contrarian Coronavirus Pick Now

Alibaba Group Holding Limited (NYSE:BABA) Is the Best Contrarian Coronavirus Pick Now

The coronavirus from China has dominated the headlines so far this year as Beijing struggles to get a handle on its spread. The wider market has largely written it off, but Chinese stocks have seen investor sentiment drop. While it’s true that the coronavirus is likely to dent China’s economy and create challenges for its businesses, there are a handful of contrarian plays that make great buy-the-dip-candidates now. Alibaba (NYSE:BABA) stock is one such contrarian play that will likely pay off in the long term.

Notably, when the firm released its earnings on Feb. 13, CEO Daniel Zhang admitted that the coronavirus presented a challenge. Zhang said the virus would, “present near-term challenges to the development of Alibaba’s business across the board.”

Alibaba CFO Maggie Wu noted that, “The means of production in the economy has been hampered by the delayed opening of offices, factories and stores.” Because of that, Wu said revenue growth would struggle in the current quarter. 

There’s no doubt that the current quarter is likely to be a rough one for Alibaba its Chinese peers. But the impact, at least for Alibaba, looks likely to be short term. 

The Future of Alibaba

Over the next few months, investors should expect turbulence among Chinese stocks. However, I believe investors have digested the impact of coronavirus on the e-commerce giant and are unlikely to punish the stock next quarter. Even if they do, that makes for another great entry point for long-term investors. Alibaba looks like a great long-term bet, coronavirus or not. 

Technical Indicators

Overall, the bias in prices is: Upwards.

By the way, prices are vulnerable to a correction towards 208.52.

The projected upper bound is: 223.86.

The projected lower bound is: 201.87.

The projected closing price is: 212.87.

Candlesticks

A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 30.6766. This is not an overbought or oversold reading. The last signal was a sell 10 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.76. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 25 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -115.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -5.450 at 212.590. Volume was 2% below average (neutral) and Bollinger Bands were 6% narrower than normal.

Open     High      Low     Close     Volume___
217.540 217.570 211.560 212.590 3,483,583
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 218.71 216.01 183.49
Volatility: 32 32 36
Volume: 3,395,644 3,267,088 3,558,515

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

ALIBABA GRP ADR is currently 15.9% above its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of BABA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on BABA.N and have had this outlook for the last 18 periods.

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